KUALA LUMPUR (Aug 11): D'nonce Technology Bhd is buying a loss-making self-adhesive labels manufacturing unit from Komarkcorp Bhd for RM9.1 million to diversify into labelling business.

D'nonce said it will pay the amount via the issuance of 58.71 million new shares at 15.5 sen per share to Komarkcorp, which is also loss-making.

Komarkcorp is estimated to own a 13.5% stake in D'nonce after the acquisition of Komark (Thailand) Co Ltd, which registered losses after tax and negative cash flow from operating activities for financial year ended April 30, 2020 (FY20), FY21 and the 11-month fiscal period ended March 31, 2022.

D'nonce's current single largest shareholder is AT Systematization Bhd, which owned a 29.62% stake as of end-June. Meanwhile, Komarkcorp's single largest shareholder is Key Alliance Group Bhd, with a 21.19% stake as of end-June.

In a stock exchange filing on Thursday (Aug 11), D'nonce said the diversification would be synergistic to expand its existing packaging and design solution business, diversify its product offerings and increase its revenue.

The group also proposed to undertake a one-for-one rights issue, with one free five-year warrant for every rights share, raising up to RM43.47 million based on an indicative issue price of 10 sen per rights share.

D'nonce intends to utilise 30% of the proceeds raised for repayment of bank borrowings, 23% for construction of new factory in Thailand, 17% for capital expenditure, 14% to build new warehouse and expand production area in Penang, 12% for working capital and the remaining for expenses to be incurred for the rights issue.

The group said proceeds raised from the rights issue will improve its cash flow while the way it plans to utilise the fund raised is expected to contribute positively to its future earnings.

D'nonce said its cash and bank balances as of end-March stood at about RM40.96 million, of which the group is only able to utilise RM27.56 million for working capital because RM13.39 million is pledged with licensed banks for banking facilities.

D'nonce's shares closed 1.5 sen or 9.68% higher at 17 sen on Thursday, giving the group a market capitalisation of RM63.88 million. Komarkcorp's share price fell half a sen or 7.69% to six sen, valuing the group at RM34.64 million.